The Gap, Inc. (GAP)

Cash conversion cycle

		Aug 3, 2024	May 4, 2024	Feb 3, 2024	Oct 28, 2023	Jul 29, 2023	Apr 29, 2023	Jan 28, 2023	Oct 29, 2022	Jul 30, 2022	Apr 30, 2022	Jan 29, 2022	Oct 30, 2021	Jul 31, 2021	May 1, 2021	Jan 30, 2021	Oct 31, 2020	Aug 1, 2020	May 2, 2020	Feb 1, 2020	Nov 2, 2019
Days of inventory on hand (DOH)	days	85.78	78.79	79.90	93.22	84.41	84.44	85.01	106.39	112.27	115.06	109.79	101.48	84.28	89.95	98.36	107.36	87.02	83.19	76.77	97.07
Days of sales outstanding (DSO)	days	—	—	7.08	—	—	—	7.95	—	—	—	8.74	—	—	—	9.60	—	—	—	7.04	—
Number of days of payables	days	61.97	48.27	54.03	56.20	53.31	44.04	46.97	48.53	58.73	58.06	70.98	60.79	58.49	58.07	69.95	89.27	63.23	36.44	41.81	44.29
Cash conversion cycle	days	23.82	30.51	32.96	37.02	31.09	40.40	45.99	57.86	53.54	57.00	47.55	40.69	25.79	31.88	38.01	18.10	23.79	46.76	42.01	52.78

August 3, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 85.78 + — – 61.97
= 23.82

The cash conversion cycle of The Gap, Inc. fluctuated over the periods provided. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally considered better as it indicates quicker turnover of resources and faster cash generation.

From the data provided, we observed that The Gap, Inc.'s cash conversion cycle ranged from a low of 18.10 days to a high of 57.86 days over the past several reporting periods. A shorter cycle, such as the one recorded on January 30, 2021, is positive as it suggests efficient management of working capital. On the other hand, periods with longer cash conversion cycles, like on October 28, 2023, and January 28, 2023, may indicate challenges in efficiently converting investments into cash.

It is important for the company to analyze the reasons behind the fluctuations in the cash conversion cycle to address any inefficiencies and optimize working capital management. By streamlining operations related to inventory control, accounts receivable, and accounts payable, The Gap, Inc. may be able to improve its cash conversion cycle and enhance overall financial performance.